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Ordinarily, and strictly speaking, no particular rule is "needed to satisfy statutory requirements." For example, much of what is done by the EPA or the SEC is designed to implement the statute by promoting clean air or more efficient trading practices. But much of what is done by the EPA or the SEC is not "needed to satisfy statutory requirements." If under section 627 agencies can do only what is, strictly speaking, legally necessary, they will not do many of the things that Congress has expected them to do.

In short: Section 627 is much too crude and confusing to be enacted into law. It is too crude to satisfy its own intended purposes. If agencies are expanding federal power in an excessive way, they should be told more particularly what to do and what not to do. Section 627 would not accomplish this task.

E. Joint resolution of disapproval. Under section 628, regulations would be submitted to Congress before they could take effect, and Congress could enact a "joint resolution of disapproval" to stop regulations from becoming law. If these joint resolutions are themselves ordinary law -- if they are to be submitted to the President for his signature -- there is no legal problem with this provision.

In that case, however, it would be unclear how much the provision would add, since Congress can already enact legislation to prevent any and all regulations from becoming law." A problem with section 628 is that it might, in practice, give well-organized interest groups a chance to bring pressure to bear on hundreds or even thousands of regulation. This provision should probably be deleted on the ground that if it is to be written in an acceptable manner, it would not add anything to Congress' esisting authority.

III. Summary and Conclusions

S. 343 makes sense insofar as it codifies the basic practice of Presidents Reagan, Bush, and Clinton for ensuring careful analysis of rules that have not yet been issued. S. 343 does not make sense insofar as it would strengthen and confuse the law of judicial review; allow private parties to coopt public resources through efforts to revisit old rules; and set out an incomplete picture of what CBA, properly understood, really entails.

I have tried to outline some possible improvements in the bill. Let me conclude by suggesting that if gress is concerned to ensure better priority-setting and greater attention to regulatory costs, it might consider the following possibilities as well:

If the joint resolution is not to be presented to the President, we have a form of legislative veto," invalidated on constitutional grounds in INS v. Chadha, 462 US 919 (1983). (Chadha involved a one-house veto but the Court's reasoning clearly extends to the two-house veto as well.)

1. A statute might give the President the authority to divert public and private resources from small problems to large ones, so as to ensure greater cost-effectiveness in government and better priority-setting. This is basically the approach suggested by Justice Stephen Breyer in his excelleat book, Breaking the Vicious Circle (1993). Justice Breyer's approach should be qualified by keeping in mind the fact that people are legitimately concerned with the various contextual factors discussed above.

2. It would be desirable for Congress to call for careful risk analysis and attention to the most serious problems first. Some legislation of this kind is now pending before Congress, and I will not discuss the problem in detail here.

3. Congress might consider experimenting with a regulatory budget, at least in the form of a public statement of "regulatory expenditures" that have been imposed on the private sector by various agencies and statutes. The private expenditures that agencies impose are off-budget and hence do not receive the kind of scrutiny that public expenditures tend to face. It is now time to recognize that private expenditures are expenditures too, and that the public has a right to see them as a whole and to evaluate whether they may sense. A step toward a regulatory budget migbt well be a way of promoting better coordination in government, better priority-setting, and more accountability for the imposition of costs on the private sector.

Senator GRASSLEY. Ms. Katzen, I welcome you. I want to tell everybody here that you are the Administrator of the Office of Information and Regulatory Affairs within the OMB. Thank you for coming. I look forward to your testimony. Would you proceed, please?



Ms. KATZEN. Thank you very much, Mr. Chairman, and I appreciate the opportunity to discuss 343 with you this morning.

S. 343 seeks to produce a more rational regulatory process by increasing the opportunities for public involvement, by focusing agencies' attentions on the consequences of their regulations, and by requiring Presidential review of important new regulations.

The administration actively supports these goals. We think they are important. We have spoken frequently and forcefully on the need for good data, for good analysis of costs, benefits, and risks, and for an open and transparent process, and my office is the office that engages in Presidential review of regulations.

We have not only talked about it, but we have done a lot administratively to enhance and encourage their development and use, and we are going to do more. Just this past Tuesday, the President expressed his commitment to regulatory reform and outlined a number of specific proposals that he was directing agency actions to implement to take the hassle out of and put common sense back into regulation.

We have also endorsed risk and cost-benefit legislation, so long as it is fair, effective, and affordable. There is much in S. 343 that meets that test, but there is much that regrettably does not. Indeed, the bill is subject to many of the criticisms that so many people have legitimately leveled at the regulatory system as it exists today. It is too broad, too prescriptive, and fraught with consequences that threaten to impede, entangle, and further bureaucratize important functions of Government.

As the President indicated on Tuesday, S. 343 is an extreme proposal. Now, what is the basis for this? In large part, it goes to the points that go beyond S. 1080, to the new additions, if you will. First, as he said, this bill, literally read, would override every single health and safety law on the books. The reference here is to section 623, which establishes decisional criteria that supplement the existing standards for all regulatory statutes.

Specifically, section 623 provides that no final major rule can be issued unless the agency finds that the potential benefits of the rule outweigh the potential costs, and that the rule will provide greater net social benefits to society than any of the reasonable alternatives identified during the rulemaking process.

Now, those sound like important and worthwhile goals, but think about what Congress has done. Throughout this century, Congress has passed and Presidents from both parties have signed publicly acclaimed legislation for which the decisionmaking criteria are different from those that I just identified. The civil rights statutes and the Americans With Disabilities Act are based on social and procedural, rather than economic standards of equity, fairness, and due process.

The Occupational Safety and Health Act reflects Congressional judgments that significant occupational safety hazards should be eliminated if economically feasible, but that costs are not a legitimate consideration when you are talking about health standards. Much of the environmental legislation is based on standards tied to the most advanced technology currently being used by the industry.

All of those decisions, all of those pieces of legislation, were vigorously debated and carefully considered at the time. It may be appropriate to review and reconsider some of those underlying statutes, but not indiscriminately and on a wholesale basis without any knowledge of the specific provisions that are being changed.

The changes in the underlying statutes should be debated and decided on the merits by the responsible committees and by the full Senate and the House, not in the guise of procedural reform. Indeed, to override 25 years of legislation in 21 lines of text seems to be something that could hardly be characterized as good government.

The President also stated why bother to seek to repeal consumer and environmental legislation if you can paralyze the Government by process? What was he talking about there? Well, section 622 calls for cost-benefit analysis of each major rule. We support costbenefit analysis. That is what my office is engaged in day in and day out. We want to use our resources, allocated our resources where they are most productive.

That takes us to the definition of when these are applicable, and that is the definition of major rules. We were sorry to see that the definition here is set at one-half of what President Reagan used 14 years ago, not even taking into account inflation, plus a number of open-ended definitions that could dramatically further reduce the threshold.

But this is only a small piece of the problem when you consider section 625. Section 625 provides that anyone may petition an agency for review of an existing major rule, or a component of that rule, if he or she believes that it does not provide greater net benefits to society than any reasonable alternative to the rule. The agency has 180 days to determine if there are reasonable questions that costs may outweigh the benefits, even if the rule has just been subject to a cost-benefit analysis or, as will likely be the case, if it was adopted following full notice and comment procedures, and affirmed by a court of law under a statute which had different decisional criteria. Now, however, it must be reopened and subjected to the new criteria, with a 180-day timeframe. That timeframe, I believe, will be impossible to meet.

If, at the end of that time, the petition is denied, the action is immediately reviewable. If it is granted, the agency must promptly undertake the full cost-benefit analysis set forth in the bill, even if the cost of the cost-benefit analysis is more than the rule is worth.

For an agency to comply with all of these provisions will be very difficult, but what is so significant to us is that the agency's tasks will not be set by the President or the people that he appoints, nor will it be set by Congress. It will be set, instead, by the special interests who pick and choose among their special projects and can file the necessary petitions and keep the petitions coming. That is what the agencies will have to focus on, and whatever the President might choose and whatever the Congress might choose will take second place, at best.

My written testimony sets forth a number of other problems with S. 343. Several should be of particular concern to this committee in that they invite a flood of cases coming to the courts by providing for judicial review of each of the steps in the process before you even get to the substance that the courts should be focusing on.

When you get to the substance, you have had a number of witnesses speaking to section 628. Section 628 starts to codify Chevron and then it inserts a new twist when it directs that if the underlying statute gives the agency discretion to choose its interpretation, the court is to look at the statutory construction that maximizes net benefits to society. Such a change will clearly generate confusion and chaos. Its ultimate effect we cannot even begin to predict, given the number of statutes that have been interpreted in other ways by those very same courts.

Mr. Chairman, I regret that I am spending the bulk of my time in my oral statement speaking to matters on which we disagree rather than on areas on which we agree. This administration has acknowledged time and again that the regulatory system needs improvement. We are dedicated and determined to pursue regulatory reform. The President said so this week; we have said so on a number of occasions.

There are too many problems with the underlying system and with the underlying statutes that gave us that system for us to stand by the status quo. That is not our choice. We want to work with you to come up with a better system, a better process, a system that works for the American people, not against them, that improves the quality of our health, our life, our environment, in a way that does not unduly burden or impose unnecessary costs.

I look forward to answering any questions that you may have, and I thank you for the time.

Senator GRASSLEY. Thank you. First of all, you don't need to apologize for talking about what we disagree on because in the Congress that is all we do.

Secondly, I don't start with any fault about what the President has tried to do on regulatory reform. He stated on television the other day that he had-and, naturally, you don't hear the whole thing when you watch television, you know, but he had been working 2 years on regulatory reform, and I don't doubt that he has.

This is a bigger problem of government, as I stated Wednesday. An office as powerful as the President, and he wants some changes done and when it comes to being chief administrator and not being able to get those changes almost like that is a sad commentary of how big and complicated our Government has gotten. It probably would be true of a Republican President as well, probably, who worked 2 years on it and still maybe not get done what they want to get done.

Maybe there is nothing that can be done about it, and I think you have indicated somewhat in your testimony that we might

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